Buy-to-let offers ideal investments
01-01-2014
Buy-to-let has become an increasingly attractive investmentPhoto: Le Toan
According to Truong An Duong, head of the Ho Chi Minh City research department from Savills Vietnam, at the peak of the residential market several years ago, individual investors and speculators tended to focus on capital gain potential when evaluating an asset.
“However, this investment psychology has changed drastically. Besides the capital gain aspect, investors now also pay attention the property’s ability to bring in a stable flow of revenue,” Duong said.
The instability of gold or stock markets has also encouraged individual investors to lean towards the buy-to-let option.
He said in some of the projects Savills was selling there were an increasing number of apartments that have been bought and leased out.
Savills’ study shows that the current gross yields from buying and leasing apartments have reached 4 to 6 per cent per year.
Due to the interest rate ceiling being continuously adjusted downward since last year, this yield rate is quite attractive to investors, especially those who have favoured real estate as an investment channel.
For buy-to-let investors, having a stable source of tenants remains critical when reaching a purchase decision.
Some developers have offered numerous programmes to support purchasers of buy-to-let apartments, such as guarantees of leasing revenue during the first year, or aid in searching for tenants without commission fees.
Some developers offer buyers flexible payment schedules such as partial payment upon handover, with the remainder being paid during the next two to three years with little or no interest.
Reasonable prices are another reason that the buy-to-let option has attracted investors.
Buy-to-let apartments on mid to high-end developments are preferred by most foreigners who currently work and reside in the cities.
Besides expatriates who reside in serviced apartments or villas, foreigners with a more limited housing budget opt to rent buy-to-let apartments.
The rent for buy-to-let units is normally 20 to 30 per cent lower than serviced apartments in the same location and development.
Foreign Direct Investment (FDI) inflows to Vietnam have recovered, which is also a positive indicator that demand for mid to high-end apartments may increase.
Ho Chi Minh City’s districts 1 and 3, the eastern area around District 2 and Binh Thanh and the south around District 7 and Phu My Hung New Urban Area are some of the most popular areas.
Foreign tenants often prefer Grade A or Grade B apartments.
There are a range of housing for lease in Hanoi, from high-end apartments (100 to 150 square metres) leased at VND18 to 30 million per month per unit, mid-end apartments from VND12 to 18 million per unit per month, and low-quality houses at VND1.5 to 2 million per unit per month.
